The Horror of the Russian Bear Market
On Tuesday this week the price of crude oil fell by 4.4% on concerns about the Spanish economy undermining the global recovery and in response the value of Russia’s stock markets plunged even more, the MICEX ruble-denominated exchange tumbling by a jolting 5.7% and the dollar-denominated RTS exchange plummeting a shocking 6.5%.
The fact that Russian shares fall instantly with the price of oil, but fall to a greater extent than that price, conclusively shows how pathetically dependent that Russian economy as a whole really is on oil, a finite resource that is running out fast. It is the unmistakable harbinger of doom for Russian society, as it is eaten away at its very foundations.
The MICEX has now shed one-fifth of its value since April, and the RTS has done likewise. Four more months like that and the entire Russian bourse would be history.
Encouragingly, there is strong evidence that foreign investors are at last wising up to the horrific dangers of investing in Russia, and are turning their backs on the Putin dictatorship.
Streetwise Professor reports “that foreign direct investment in Russia fell 17.6 percent in the first quarter of 2010. And it is not that 2009 was such a great year: FDI in 2009 was down 41 percent over 2008.” Foreign money, in other words, is abandoning Russia in droves despite the so-called “recovery” of the Russian economy and the so-called “reset” of relations called for by the Obama administration. Wise investors clearly see that Russia is nothing more than a gambling casino run by the mafia, and they realize that such a place is no place for their hard-earned cash.
The Moscow Times reports: “As many as 85 percent of Russian businessmen ‘have their bags packed’ and are ready to leave the country because they do not trust the government.”
It’s about time that the world realized there is nothing to be gained by pouring money down the Russian rat hole.